There is political agreement that the expansion of offshore wind power in Denmark must in future be without subsidies. The developers must pay the Danish state for the right to use the ocean areas, and the state will have a 20% ownership share in the offshore wind farms (OWFs).
On 30 May 2023, a broad majority in the Folketing agreed on the framework for the government's invitations to tender for 9 GW offshore wind, which is to be constructed no later than at the end of 2030.
A framework for the tender regarding Energiø Bornholm (3 GW) has been laid down as well as a framework for 6 GW offshore wind in the areas the North Sea (three areas), Kattegat II, Kriegers Flak and Hesselø.
Tender framework for 6 GW offshore wind
The invitation to tender will include:
- Requirement for a minimum capacity and the possibility of over-planting
- No subsidy and an annual concession fee as payment model
- 20% state ownership share.
In addition, there are increased requirements for sustainability and social responsibility, which also apply to the invitation to tender for Energiø Bornholm.
Over-planting
For the areas the North Sea I, Kattegat II and Kriegers Flak
II, tenders for a minimum capacity of 1 GW per area of the tender
are invited, and grid connection possibilities of a minimum of 1 GW
are prepared for each area. For these areas, the concessionaire
will be allowed to install capacity in excess of the minimum
capacity in the invitation to tender. The installation of the
minimum capacity must be completed by year-end 2030, whereas any
over-planting capacity must be fully established two years after
the deadline for the minimum capacity at the latest.
Hesselø OWF is to have a minimum capacity of 0.8 GW. A total capacity of 1.2 GW will be allowed, and all capacity must be fully established before the end of 2029.
Annual concession fee to the Danish state
The bidders will compete on offering the highest fixed annual
payment to the state for 30 years for the right to use the ocean
area. The detailed conditions of the concession will be determined
in connection with the tender.
State ownership share
A concessionaire must create a project company (public limited
company or limited partnership company) for installation, operation
and decommissioning, if any, of each OWF. The state will be
co-owner of the offshore wind projects via a newly established
state holding company (a private limited company) contributing pro
rate equity, which will at all times safeguard the state a 20%
ownership share of the individual project companies.
The tender material will include draft terms, including of the relevant corporate documents, for the state holding company's co-investment in and subsequent co-ownership of the individual offshore wind projects.
In continuation of the conclusion of the concession agreements, it will, according to the political agreement, be necessary to conduct a due diligence process between the state holding company and the project company.
Tender framework for Energiø Bornholm
The minimum capacity for Energiø Bornholm is 3 GW, and up to 800 MW over-planting will be allowed.
The parties to the agreement assume that, whereas offshore wind can be established in Denmark without subsidies, it will for Energiø Bornholm be necessary to subsidise the transmission line between Zealand and Bornholm as well as half of the onshore plant on Bornholm.
The successful bidder for Energiø Bornholm will be found on the basis of:
- Lowest fixed settlement price per kilowatt-hour or
- Largest payment to the state in the form of an annual concession fee.
The subsidy will be provided for 20 years. Subsidy payments will be subject to a total subsidy cap as well as annual subsidy caps.
It will be possible for the concessionaire to withdraw from the subsidy model and opt out of receiving subsidies. However, the concessionaire will not be able to withdraw from the concession fee scheme, and the winning bidder is thus under an obligation to pay a fixed, annual concession fee for 30 years.
The subsidy model for Energiø Bornholm is subject to final approval from the European Commission.
New requirements for sustainability and social responsibility in tenders
A number of new requirements for sustainability and social responsibility are introduced and will apply to the tenders for 6 GW and Energiø Bornholm:
- Third-party verified environmental declarations for main components, e.g., foundations, cables, blades and towers on the basis of a life cycle analysis (LCA)
- Third-party verified LCA at project level, covering installation, operation and decommissioning of the OWF
- Recyclable turbine blades unless a market analysis from the Danish Energy Agency shows that the requirement will prevent establishment of one or more of the 6 GW before the end of 2030
- Systematic monitoring of the impact on nature and the environment of own OWFs
- A positive impact on the marine environment and biodiversity for two OWFs (one located in the North Sea and one located in the Danish coastal waters)
- Social clauses and chain liability for social clauses.
Advice on offshore wind
Bech-Bruun provides legal advice on all stages of the development of offshore wind projects. Our expertise and commercial approach ensure close cooperation with clients starting from the early stages of project development and throughout the useful life of the project.
Bech-Bruun is among the leading advisers in the area of renewable energy. Our specialists are internationally recognised for their significant industry knowledge and they advise on all legal aspects of the energy area. With our long-standing experience from major utility projects, complex transactions in the solar and wind industries and extensive contracts, we have built unique market insight to the benefit of our clients' businesses. And with our position at the cutting-edge of the green transition, we provide advice to our clients on the green solutions of the future.
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